Calculate unearned premiums and refunds for policy cancellations.
Calculation Results
Total Policy Days:0
Days Used (Earned):0
Days Remaining (Unearned):0
Daily Premium Rate:$0.00
Earned Premium (Insurer Keeps):$0.00
Unearned Premium (Refund):$0.00
function calculateProRata() {
// Clear previous errors and results
var errorDiv = document.getElementById("errorMsg");
var resultDiv = document.getElementById("results");
errorDiv.style.display = "none";
resultDiv.style.display = "none";
// Get Inputs
var premiumInput = document.getElementById("totalPremium").value;
var startDateInput = document.getElementById("startDate").value;
var endDateInput = document.getElementById("endDate").value;
var effectiveDateInput = document.getElementById("effectiveDate").value;
// Validation
if (!premiumInput || !startDateInput || !endDateInput || !effectiveDateInput) {
errorDiv.innerHTML = "Please fill in all fields.";
errorDiv.style.display = "block";
return;
}
var premium = parseFloat(premiumInput);
// Parse dates (set time to noon to avoid timezone/daylight saving shift issues affecting day count)
var start = new Date(startDateInput + "T12:00:00");
var end = new Date(endDateInput + "T12:00:00");
var effective = new Date(effectiveDateInput + "T12:00:00");
if (isNaN(premium) || premium < 0) {
errorDiv.innerHTML = "Please enter a valid premium amount.";
errorDiv.style.display = "block";
return;
}
if (end <= start) {
errorDiv.innerHTML = "Policy Expiration Date must be after the Start Date.";
errorDiv.style.display = "block";
return;
}
if (effective end) {
errorDiv.innerHTML = "Effective Cancellation Date must be between Start and Expiration dates.";
errorDiv.style.display = "block";
return;
}
// Calculation Logic
var oneDay = 24 * 60 * 60 * 1000;
// Total days in policy term
var totalDays = Math.round(Math.abs((end – start) / oneDay));
// Days used (Earned)
var usedDays = Math.round(Math.abs((effective – start) / oneDay));
// Days remaining (Unearned)
var remainingDays = totalDays – usedDays;
// Financials
var dailyRate = premium / totalDays;
var earnedPremium = dailyRate * usedDays;
var unearnedPremium = dailyRate * remainingDays;
// Display Results
document.getElementById("resTotalDays").innerHTML = totalDays;
document.getElementById("resUsedDays").innerHTML = usedDays;
document.getElementById("resRemainingDays").innerHTML = remainingDays;
document.getElementById("resDailyRate").innerHTML = "$" + dailyRate.toFixed(4);
document.getElementById("resEarned").innerHTML = "$" + earnedPremium.toFixed(2);
document.getElementById("resUnearned").innerHTML = "$" + unearnedPremium.toFixed(2);
resultDiv.style.display = "block";
}
Pro Rata Premium Calculator: An Excel Alternative
Calculating insurance refunds manually or setting up complex formulas in Excel can be prone to human error.
This Pro Rata Premium Calculator provides an instant, accurate way to determine the unearned premium
(the refund amount) and the earned premium (the amount the insurer retains) when a policy is cancelled or endorsed mid-term.
How Pro Rata Calculation Works
The pro rata method is the most common and equitable way to handle insurance cancellations. Unlike "short rate" cancellations, which apply a penalty fee,
pro rata returns the exact proportionate amount of the premium for the time remaining on the policy.
The core formula used in this calculator (and typically in Excel spreadsheets) is:
Refund = (Total Premium ÷ Total Policy Days) × Days Remaining
Step-by-Step Breakdown
Determine Daily Rate: Divide the total annual (or term) premium by the number of days in the policy term (usually 365 or 366 for leap years).
Calculate Earned Days: Count the number of days from the policy inception date to the cancellation effective date.
Calculate Unearned Days: Subtract the earned days from the total policy days.
Final Calculation: Multiply the unearned days by the daily rate to get the refund amount.
Why Use This Tool Instead of an Excel Sheet?
While many insurance professionals search for a "pro rata premium calculator excel" template, using a web-based tool offers several distinct advantages:
No Date Errors: Excel date formatting can sometimes be tricky depending on cell formatting. This tool automatically handles date logic, including leap years.
Instant Access: No need to download, save, or open a spreadsheet file.
Visual Validation: Immediate error messages if your effective date falls outside the policy term, preventing calculation mistakes.
Definitions of Key Terms
Earned Premium
The portion of the premium that applies to the expired part of the policy period. This is the money the insurance company has "earned" for providing coverage up to the cancellation date.
Unearned Premium
The portion of the premium that applies to the unexpired part of the policy period. In a pro rata cancellation, this is the amount returned to the policyholder.
Effective Date
The specific date on which the cancellation or endorsement becomes active. Coverage ceases at 12:01 AM on this date typically.
Common Use Cases
This calculator is essential for insurance agents, underwriters, and policyholders in the following scenarios:
Policy Cancellation: When a client cancels a policy because they sold the insured asset (e.g., a car or home).
Mid-Term Endorsements: Calculating the premium adjustment if coverage is reduced mid-term.
Audit Verification: Double-checking refund checks received from carriers to ensure accuracy.